Driving the economy forward through development

We are all aware of the difficulties that the current economic climate poses for property development. Funding shortages affect developers and end users alike, and hinder the delivery of new projects. Yet we are told through a number of Government Policies, not least the National Planning Policy Framework, that development is key to creating growth and driving the economy into recovery.

One positive change has recently been made to planning legislation which may permit developers to deliver projects which have stalled owing to the recession.

Many planning permissions are granted subject to legal agreements made under Section 106 of the Town and Country Planning Act 1990. These agreements aim to mitigate the effects of the development permitted by obliging the developer to do, or not to do certain specified things, and often to pay sums of money towards items such as new roads, or new schools.

Many of the Section 106 Agreements concluded in pre-recessionary years now pose a financial burden upon development sites which make development economically unviable. This is normally a result of land valuations and the end products being worth less than previously. Sites affected by such onerous obligations will simply not be developed if there is no profit to be made from them.

In this situation, the developer has two options. The first one is to try and agree a variation to the Section 106 Agreement with the Local Planning Authority, and the consent of any of the other original parties. If negotiations fail, then the second option is make a formal application to the Local Planning Authority to alter the terms of the Agreement, or to discharge it in its entirety. The problem with this until recently was that the Agreement in question needed to be at least 5 years old.

New regulations came into force on 28 February which provide that all Section 106 Agreements made on or prior to 6 April 2010 will be eligible for application to be amended. This measure will enable developers to re-visit agreements made during 2008 and should serve to "free up" some currently stalled development sites.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.